[Federal Register Volume 70, Number 100 (Wednesday, May 25, 2005)]
[Notices]
[Pages 30164-30165]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E5-2636]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-51720; File No. SR-CBOE-2005-33]


Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change Relating to Increased Class Quoting Limits in AAPL, GOOG, 
MNX, QQQQ

May 19, 2005.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on April 21, 2005, the Chicago Board Options Exchange, Incorporated 
(``CBOE'' or ``Exchange'') filed with the Securities and Exchange 
Commission (``Commission'' or ``SEC'') the proposed rule change as 
described in Items I, II and III below, which Items have been prepared 
by the CBOE. The CBOE has designated this proposal as one constituting 
a stated policy, practice, or interpretation with respect to the 
meaning, administration, or enforcement of an existing rule under 
Section 19(b)(3)(A)(i) of the Act,\3\ and Rule 19b-4(f)(1) 
thereunder,\4\ which renders the proposal effective upon filing with 
the Commission. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A)(i).
    \4\ 17 CFR 240.19b-4(f)(1).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The CBOE proposes to increase the class quoting limits in a select 
number of active options classes. The text of the proposed rule change 
is available on the Exchange's Web site (http://www.cboe.com), the 
Office of the Secretary, CBOE and at the Commission.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
Sections A, B, and C below, of the most significant aspects of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Commission approved the Exchange's Remote Market-Maker 
(``RMM'') program (``Program'') on March 14, 2005.\5\ CBOE Rule 8.3A, 
Maximum Number of Market Participants Quoting Electronically per

[[Page 30165]]

Product, establishes class quoting limits (``CQLs'') for each class 
traded on the Hybrid Trading System.\6\ A CQL is the maximum number of 
quoters that may quote electronically in a given product and the 
current levels are established from 25-40, depending on the trading 
activity of the particular product.
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    \5\ See Securities Exchange Act Release No. 51366 (March 14, 
2005), 70 FR 13217 (March 18, 2005).
    \6\ See CBOE Rule 8.3A.01.
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    CBOE Rule 8.3A.01(c) provides a procedure by which the President of 
the Exchange may increase the CQL for a particular product. In this 
regard, the President of the Exchange may increase the CQL in 
exceptional circumstances, which are defined in the rule as ``* * * 
substantial trading volume, whether actual or expected.''\7\ The effect 
of an increase in the CQL is procompetitive in that it increases the 
number of market participants that may quote electronically in a 
product. The purpose of this filing is to increase the CQLs for four 
products trading on the Exchange: Apple Computer (AAPL), options on the 
Nasdaq-100 Index Tracking Stock (QQQQ), options on the mini-Nasdaq 100 
index (MNX), and Google (GOOG). Specifically, the Exchange proposes to 
increase the CQLs in these products by the following amounts: AAPL CQL 
increased by 4; MNX CQL increased by 4; QQQQ CQL increased by 2; and 
GOOG CQL increased by 3.
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    \7\ ``Any actions taken by the President of the Exchange 
pursuant to this paragraph will be submitted to the SEC in a rule 
filing pursuant to Section 19(b)(3)(A) of the Exchange Act.'' CBOE 
Rule 8.3A.01(c).
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    Each of these products routinely is among the most actively-traded 
on the Exchange for both index and equity products and, therefore, 
there is substantial trading volume in each of these products. 
Increasing the CQLs in each of these products will enable the Exchange 
to enhance the liquidity offered, thereby offering deeper and more 
liquid markets. Each of these products has a ``waiting list'' of market 
participants waiting to quote and, per CBOE Rule 8.3A's requirements, 
quoting spots will be offered on a time priority basis, starting with 
the first person on each list. The Exchange represents that it will 
comply with all of the requirements of CBOE Rule 8.3A in increasing the 
CQLs in these products and, if it determines subsequently to reduce 
such CQLs, in reducing the CQLs in these products.\8\ Changes to the 
CQLs will be announced to the membership via Information Circular.
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    \8\ The Exchange has represented that it will follow the 
procedures outlined in CBOE Rule 8.3A.01(a) for assigning new CQLs, 
based on revised trading volume statistics, at the end of the 
calendar quarter and that if the new CQLs are lower than the 
increased CQLs assigned as a result of this proposed rule change, 
the procedures outlined in CBOE Rule 8.3A.01(a) will be followed. 
Telephone conversation of May 18, 2005, between Patrick Sexton, 
Assistant General Counsel, CBOE and David Michehl, Attorney, 
Division of Market Regulation, Commission.
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2. Statutory Basis
    The CBOE believes that the proposed rule change is consistent with 
the Act and the rules and regulations under the Act applicable to a 
national securities exchange and, in particular, the requirements of 
Section 6(b) of the Act.\9\ Specifically, the Exchange believes the 
proposed rule change is consistent with the Section 6(b)(5) \10\ 
requirements that the rules of an exchange be designed to promote just 
and equitable principles of trade, to prevent fraudulent and 
manipulative acts and, in general, to protect investors and the public 
interest.
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    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The CBOE does not believe that the proposed rule change will impose 
any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants or Others

    The Exchange neither solicited nor received written comments on the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing proposed rule change will take effect upon filing 
with the Commission pursuant to Section 19(b)(3)(A)(i) of the Act\11\ 
and Rule 19b-4(f)(1) thereunder,\12\ because it constitutes a stated 
policy, practice, or interpretation with respect to the meaning, 
administration, or enforcement of an existing rule.
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    \11\ 15 U.S.C. 78s(b)(3)(A)(i).
    \12\ 17 CFR 240.19b-4(f)(1).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission may summarily abrogate such rule change if it 
appears to the Commission that such action is necessary or appropriate 
in the public interest, for the protection of investors, or otherwise 
in furtherance of the purposes of the Act.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an e-mail to [email protected]. Please include 
File Number SR-CBOE-2005-33 on the subject line.

Paper Comments

     Send paper comments in triplicate to Jonathan G. Katz, 
Secretary, Securities and Exchange Commission, 450 Fifth Street, NW., 
Washington, DC 20549-0609.
    All submissions should refer to File Number SR-CBOE-2005-33. This 
file number should be included on the subject line if e-mail is used. 
To help the Commission process and review your comments more 
efficiently, please use only one method. The Commission will post all 
comments on the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, 
all written statements with respect to the proposed rule change that 
are filed with the Commission, and all written communications relating 
to the proposed rule change between the Commission and any person, 
other than those that may be withheld from the public in accordance 
with the provisions of 5 U.S.C. 552, will be available for inspection 
and copying in the Commission's Public Reference Room. Copies of such 
filing also will be available for inspection and copying at the 
principal office of the CBOE. All comments received will be posted 
without change; the Commission does not edit personal identifying 
information from submissions. You should submit only information that 
you wish to make available publicly. All submissions should refer to 
File Number SR-CBOE-2005-33 and should be submitted on or before June 
15, 2005.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E5-2636 Filed 5-24-05; 8:45 am]
BILLING CODE 8010-01-P